US multinationals are holding more than $2.1 trillion (£1.25trn) in profits overseas in a bid to avoid domestic income taxes, according to research by Audit Analytics.
The company's analysis suggests that the amount shifted abroad almost doubled from 2008 to 2013, based on federal financial filings for companies listed in the Russell 1000 index of US corporations.
Under US tax law, corporations do not have to pay income tax on most of their overseas profits until they are brought into the country. These earnings can be held offshore for years if they are classified as indefinitely invested abroad.
Audit Analytics says that a total of 547 US companies held $2.12trn (£1.25trn) in Foreign Indefinitely Reinvested Earnings (IRE) during the last calendar year, up from $1.89trn a year earlier.
General Electric topped the list with $110bn of earnings stored abroad, followed by Microsoft ($76.4bn), Pfizer ($69bn), Merck ($57.1bn) and Apple ($54.4bn).
While the amount of Foreign IREs has increased dramatically over the last six years, Audit Analytics said that the number of companies disclosing these reinvested foreign earnings has increased by 12% since 2008.
Democrat senator Ron Wyden, who chairs the Senate finance committee, which is currently examining the impact of tax breaks used by US companies, said: ‘The new numbers... certainly highlight what is one of the key challenges for tax reform. I do think there need to be some reforms in this area.’
General Electric said in a statement: ‘GE operates in more than 170 countries, and most of these overseas earnings have been reinvested in active business operations like manufacturing facilities and loans to non-U.S. customers.’
A Merck spokesman said the company files its tax returns in accordance with all applicable laws and regulations.
A Microsoft spokesman referred reporters’ questions to 2012 congressional testimony, in which company officials said it abides by foreign and U.S. tax laws.
In testimony in 2013 before Congress, Apple chief executive Tim Cook said the company is a large taxpayer and does not use tax gimmicks. Apple declined to comment on the new report.
Pfizer was not available for comment.
The release of the research also comes shortly after Caterpillar was called up before a Senate committee to justify its international tax arrangements.
